1 comment on “Too Much Finance”

It seems to me that their linear models are actually trivial, reflecting underlying correlations. In the first one, the latent variable is population; larger countries will of course have both larger GDP and greater credit growth, on average. In the second one, the latent variable is level of economic development. More advanced economies have both larger GDP and higher levels of employment in finance. The second models in each set have interesting implications, but I agree with Owen that those implications are not well flushed out by the theoretical model—which certainly makes some sense but, as Owen argues, are incomplete.